Lutnick Redux

Recasting an earlier piece I wrote about Howard Lutnick

On April 3, 2025, a day after “Liberation Day,” I wrote a scathing post about US Commerce Secretary Howard Lutnick after he had just appeared on CNBC to defend President Trump’s now-abandoned “reciprocal tariff” scheme. Lutnick is now in the news for matters that I never contemplated when I wrote the piece some ten months ago. I have no idea if he will survive the current outcry over lying about his involvement with Jeffrey Epstein. But as a public service, I think it is important to remind you, dear readers, of what I said back then. The original post follows:

Sheer Insanity

April 3, 2025

This missive could be about Donald Trump, of course — the craziest US president of my lifetime. But it’s not. Instead, I draw your attention to Howard Lutnick, America’s 41^st Secretary of Commerce. In the 41 days since he was sworn into office, Secretary Lutnick has ascended to the rarefied heights as the premier econo-sycophant of the Trump Administration. [Note: I have disqualified convicted felons, like Peter Navarro, from this ignominious sweepstakes.] Lutnick’s widely publicized views on the US economy, financial markets, and policy are beyond ludicrous. Hence, the title above.

To his credit, Lutwick is a most energetic man — beyond exuberant in his sputtering displays of fealty to the Dear Leader that are frequently broadcast on major media outlets. After a near-sleepless night, I woke up to him this morning on CNBC’s Squawk Box to hear him gushing (and sputtering) with praise in his postmortem on the policy pronouncements of Liberation Day. Like the case with Trump, I have learned to expect the unexpected from Lutnick. But today’s incoherent interview, a transcript of which can be found here, was literally off the charts.

And so, I have compiled a list of Lutnick’s Top Ten, taken verbatim from this interview. My favorites follow, along with brief editorial commentary on each:

1. “This is the reordering of fair trade.”

“This,” of course refers to the reciprocal tariff policy announced on April 2. Don’t be fooled by the meaningless Greek-letter formula explanation found on the US Trade Representative’s website. “Fair” in the lexicon of Trumpspeak means a “zero” trade balance (goods and services, combined). Unknowingly, apparently to Lutwick, that's all but impossible for any saving-short nation to pull that off. That’s especially the case, with Trump’s outsize budget deficits, which will forever depress America’s already anemic domestic saving. Large US trade deficits are here to stay.

2. “I don't think it’s effective for the world to retaliate. I mean, those things are silly.”

Try telling that to Canada, which has already moved to retaliate — despite being threatened with statehood. The EU is getting ready to retaliate, and I heard directly from China last week that we can expect more of the same following an earlier retaliation from Trump’s initial set of 20% tariff hikes. How silly of them to stand up and fight back.

3. “I expect most countries to … stop picking on us.”

Why does America always play the victim card? First, Japan in the 1980s, then China. Now it is the whole world. We ran bilateral trade deficits with 101 nations in 2024 – a multilateral problem that is an outgrowth of our own macroeconomic saving-investment imbalances. Easier to blame others than to look in the mirror.

4. “You’re going to see tariff rates decline.”

The chart below from the Yale Budget Lab suggests that an eventual drop in tariffs would be a no-brainer after the greatest tariff hike since the early 1930s. Notwithstanding the strategic brilliance of the Art of the Deal, which implies that the Great Negotiator will squeeze tariff reductions out of our wounded trading partners, that begs the critical questions of when, and by how much? Who flinches first — Donald or them?

5. “We need to stop supporting the rest of the world and start supporting American workers.”

As measured by purchasing power-parity, the United States accounted for about 15% of world GDP in 2024, down from 22% in the 1980s. By contrast, emerging market and developing economies accounted for 60% of world GDP in 2024. Up dramatically from 35% in the 1980s. Who is supporting whom?

6. “We are the consumer of the world.”

Yes, the consumption share of the US is high, some 68% of our GDP in 2024. But in US dollar terms, the $18.8 trillion we spent in 2023 accounted for 31.3% of the world’s household consumption, according to data from your own US Commerce Department and the World Bank. While that is obviously greater than America’s 25% share of dollar-based world GDP, that still leaves the rest of the world accounting for fully 69% of global consumption. Mr. Secretary, there may be more trees in this forest than you think.

7. “ It’s time to stop exporting…”

Come on, Howard, I know you’re a classic loose-tongued Wall Street guy, but this is beyond absurd. With the all-powerful American consumer likely to be on the skids due to tariff-induced price hikes that will be squeezing real disposable personal incomes, the 11% of the US GDP that goes to the exports of an instantly revitalized manufacturing sector might come in handy in supporting what promises to be an increasingly beleaguered US economy. I was aghast when you argued recently that you wanted to remove government spending from GDP. We economist geeks do that all the time for analytical purposes, not to distort the data. And now, you want to strip out exports?

8. “ (It’s time to) stop taking all our factories and letting the rest of the world have them. It’s time to bring them home.”

Factories are not on wheels — they don’t roll back easily to the United States. Nor can new ones be built overnight. Average construction time is two to three years, shorter for warehouses but longer for more complex facilities like semiconductor fabs and auto plants. At least, that’s according to the National Association of Manufacturers, whose president, Jay Timmons warned today of the adverse impacts likely to come from Trump’s latest tariff binge. An uncertain demand climate seriously compromises the possibility of a potential renaissance of Smokestack America. As Timmons stated , the huge jump in trade uncertainty — up some 40 points in the past six months— raises profound questions about the security of the planning horizon that will undoubtedly complicate the Trumpian presumption, parroted by Lutnick, that factories are quickly – and bigly —coming back home.

9. “… we’ve got $5 trillion of factories coming to America. Think of $5 trillion divided by (Trump’s) four years. That is huge GDP growth…”

The math is correct: 5 divided by 4 equals 1.25. But is 5 going to be the right number? In light of the extreme uncertainty that has been triggered by Donald Trump’s on-again, off-again policy pronouncements of the past 74 days, I suspect that, out of an abundance of caution, many of these investment announcements could be deferred, if not canceled — especially if the economy slows, or pray tell, even flirts with recession. Uncertainty is the enemy of decision making. And thanks to Trump, there is an abundance of uncertainty overhanging the marketplace.

10. “We are growing too much like the rest of the world. Our growth rate should be double or triple them.”

Do you have a passport? Have you actually spent any time kicking the tires of the world’s major growth engines in Asia? According to the International Monetary Fund, Emerging and Developing Asia has grown by an average of 6.8% over the past two decades, more than three times faster than US growth of 2.1% over the same period. Do you seriously think this can be reversed in our coming Golden Age? My advice is to take a long trip and see what growth really looks like.

Howard Lutnick is a loose cannon. My Top Ten list above is taken from just one 7-minute interview that was conducted this morning on CNBC. Go to the Commerce Department website and you can see for yourself that this was not an outlier in terms of Lutnick’s penchant for misinformation and his concomitant failure to understand basic economics. If he was still a Wall Street executive, this would not be a problem — I used to deal with such loose talk all the time in my Morgan Stanley days. But Secretary Lutnick is now a senior official of the United States government, with far reaching responsibilities for data integrity (Bureau of Economic Analysis), trade policy (US Trade Representative), and export controls sanctions policy (Bureau of Industry and Security). What he says in public matters.

US Commerce Secretaries have had a checkered past. Herbert Hoover was the third Commerce Secretary before he went on to become the 31^st President of the United States. You would have thought that his seven-year stint at Commerce prepared him well to assume the presidency in early 1929. But it was a time of mounting trade pressures, especially for America’s farmers. And as president, Hoover went with the political flow of protectionism and signed the infamous Smoot-Hawley Tariff Act into law in June 1930. We all know what happened next as a trade war led to a 65% plunge in global trade between 1929 and 1934. Howard Lutnick may well be remembered as another Herbert Hoover. It is sheer insanity to ignore his predecessor’s egregious blunder.